DVAT Composition Scheme for Restaurants & Halwais
A new Composition Scheme under section 16(12) of the DVAT Act was recently introduced by DVAT Deptt vide notification dt. 18/03/2016, wherein the registered dealers whose annual turnover is upto ₹ 50 Lakh and who make sales of cooked food, snacks, sweets, savouries, juices, aerated drinks, tea and coffee etc. (i.e. who are engaged in restaurants/halwai business) were given an option to pay composition tax @ 5% w.e.f. 1st April, 2016.
I. DVAT to initiate action against Restaurants/ Halwais continuing under Old Composition Scheme
Dealers, who were earlier under composition @ 1% were mandatorily required to opt out from old composition scheme w.e.f. 1st April, 2016 by filing Form DVAT-03 latest by 30th April, 2016 and to pay tax either as a non-composition dealer or to opt for the new Composition scheme @ 5% by filing Form RH-01 along with the Form DVAT-03 (for withdrawal from old composition @ 1%).
A dealer engaged in restaurant/ halwai business who is still continuing with old composition @ 1% after 31st March, 2016 is not only liable to pay due DVAT as per non composition rates but also he is liable to pay penalty, etc. for contravening the provisions of the DVAT Act. Soon DVAT Deptt will initiate action, in due course, against offenders on this account, i.e. restaurant/halwais continuing with old composition of tax @ 1% after 31st March, 2016.
II. DVAT Clarification Circular 1/2016-17 dt. 27 April 2016 reg. Composition Scheme for Restaurants & Halwais
DVAT Deptt. has clarified that the condition requiring payment of tax on opening stock is not applicable to those dealers who, w.e.f. 1 st April, 2016, intend to shift from composition scheme under section 16(1) to the new composition scheme notified under section 16(12), as the goods held by such dealers on the transition date have already suffered VAT at the time of purchase and also no ITC on such purchases has been claimed by such dealers.
Thus, the field 8 of Form RH01 is irrelevant for such dealers, as they are not required to pay tax on their opening stock held on 1st April, 2016. The condition requiring payment of tax on opening stock is applicable only when a dealer paying tax under the normal scheme of the Act (i.e. as per section 3) opts for composition scheme.
It is also clarified by the DVAT Deptt that such dealers while shifting from composition scheme under section 16(1) to the new composition scheme notified under section 16(12) w.e.f. 1 st April, 2016 shall not be eligible for claiming ITC on closing stock held by them on 31 st March, 2016.
III. Composition Scheme for Restaurants & Halwais notified vide DVAT Notification dt 18th March 2016
The DVAT Deptt has notified composition scheme for Restaurants and Halwais (sweets shops) operating in NCT of Delhi, effective from 1st April, 2016, as under:
a) Rate of Composition Tax / DVAT
5% of the entire turn-over
b) Eligible Dealers for Composition
Every registered dealer whose turnover during the preceding year as well as the expected turnover during the current year does not exceed fifty lakh rupees and who is not making any sales other than that of ready to eat foods and non-alcoholic beverages including cooked food, snacks, sweets, savouries, juices, aerated drinks, tea and coffee etc. served in or catered indoors or outdoors by hotels, restaurants, sweet-stalls, sweet shops, clubs, caterers and any other eating houses;
Provided that the condition of turnover during preceding year shall not apply to a dealer who commences his business during the current year.
c) Special Conditions for availing composition scheme
(1) The dealer shall,
(a) not be eligible for making purchases from or procuring goods from or making sales to or making supplies to any place outside Delhi;
(b) not be eligible for making purchases from a person who is not registered under the Act except in the case of goods specified in the First Schedule;
(c) not be eligible to claim tax credit under section 9 of the Act;
(d) not calculate his net tax under section 11 of the Act;
(e) not collect any amount by way of tax under the Act;
(f) not be entitled to issue `Tax Invoices’; and
(g) continue to retain the original copies of all tax invoices and all retail invoices for all his purchases and copies of all retail invoices issued by him in respect of his sales as required under section 48 of theAct.
(2) A dealer who is paying tax undersection 3 of the Act, can opt for payment of tax under this scheme by filing an application in Form RH 01 appended to this notification within a period of thirty days from the first day of the year with effect from which composition is opted.
(3) A dealer applying for a fresh registration can also opt for this scheme by filing application in Form RH 01appended to this notification alongwith his registration application in Form DVAT 04.
(4) A dealer opting to pay tax under this scheme shall pay tax, at the rates specified in section 4 of the Act, on the value of the opening stock held by him on the first day from which he opts for this scheme and shall furnish the details of such opening stock in Form RH 02appended to this notification along with
proof of payment of due tax in Form DVAT 20, with his application in Form RH 01.
(5) Once a dealer has opted to pay tax under this scheme, he shall, except under the circumstances described at Sl. No. (6) below, not be eligible to withdraw his option before the end of the year for which opted to pay tax under this scheme.
(6) A dealer who, having opted to pay tax under this scheme for a particular year, does not intend to opt for payment of tax under this scheme for the following year, shall, subject to the conditions contained in section 20 of the Act in so far as they are applicable and further subject to furnishing of intimation regarding withdrawal from this scheme in form RH 03 within thirty days from the end of the year for which opted to pay tax under this scheme, be eligible to claim credit of tax paid on the opening stock held by him on the first day of said following year.
d) General Conditions governing composition scheme
(1) All the provisions of the Act and the rules made there under which are not contrary to this scheme shall apply to every dealer opting to pay tax under the scheme.
(2) The tax period for the dealers opting to pay tax under this scheme shall be a quarter unless otherwise prescribed by the Commissioner for a dealer or class of dealers.
(3) In view of the second proviso to sub-section (1) of section 16 of the Act a dealer who has already opted for composition scheme as per sub-sections (1) to (11) of section 16 and who is covered under the class of dealers described in coloumn 1 of the above table, shall mandatorily withdraw from the composition scheme with effect from 1st April, 2016 by filing application in Form DVAT 03 upto 30th April, 2016. However, such dealers can opt for composition under this scheme as per the procedure explained above.
(4) Notwithstanding anything contained in this notification, the Commissioner may notify, by a special or general order, that any or all of the forms appended to this notification shall be filed online.
(5) Tax paid by a dealer under this scheme shall not be adjusted at any stage against the liability of the dealer to pay tax under section 3 of the Act for any period other than the period for which the dealer was eligible for paying tax under this scheme.
(6) If the turnover of a dealer who opted to pay tax under this scheme exceeds fifty lakh rupees at any time during the year for which so opted, he shall be liable to pay tax under section 3 of the Act on and from the date his turnover exceeds fifty lakh rupees and he shall, subject to the conditions contained in section 20 of the Act in so far as they applicable and further subject to furnishing the intimation in Form RH 03 within seven days from the date on which turnover exceeded fifty lakh rupees, be entitled to claim credit of the input tax paid on opening stock held by him in Delhi on such day.
(7) A dealer who has opted to pay tax under this scheme and has defaulted to furnish the returns for two consecutive tax periods by the prescribed due dates shall, with effect from the first day of the tax period immediately next to the latter tax period in respect of which the default has been committed
(i) cease to be liable to pay tax under this scheme,
(ii) be liable to pay tax under section 3 of the Act.
Such a dealer shall, subject to the conditions contained in section 20 of the Act in so far as they applicable and further subject to furnishing the intimation in Form RH 03 within seven days after the end of due date prescribed for filing of return for the latter tax period in respect of which the default has been committed, be eligible to claim credit of the tax paid under this Act on the opening stock held by him in Delhi on the first day of the tax period immediately next to the latter tax period in respect of which the default has been committed.
(8) In case a dealer has opted for this scheme but has failed to comply with the conditions specified therein or who, at any later stage, is found not eligible for having opted this scheme, all the provisions of the Act including the liability to pay tax under section 3, along with interest due for delay, if any, shall apply mutatis mutandi as if the dealer has never opted for this scheme.